UN: Global food prices reach record high, in ‘danger territory’

Posted Jan 6, 2011 by Lynn Herrmann
Global food security has reached a danger zone due to a steady rise in prices of sugar, grains and oilseed which is likely to lead to global inflation, increased hunger issues among the poor and strained international relations.
World food prices rose for the eighth straight month in February  reaching a record high that dates ...
World food prices rose for the eighth straight month in February, reaching a record high that dates back 20 years to when the UN's Food and Agriculture Organization first began tracking them.
A monthly index on food prices compiled by the UN showed December surpassed the June 2008 peak that started food riots on the planet. The index is based on an international basket consisting of corn, wheat, meat, sugar and dairy produce.
“We are entering danger territory,” said Abdolreza Abbassian, chief economist of the UN Food and Agriculture Organization (FAO), according to the Guardian.
Weather conditions across the planet have created a cause of concern, with extreme cold in the northern hemisphere threatening winter wheat crops and dry regions in Argentina bordering on drought conditions. Flooding in Australia’s agricultural region is compounding those worries.
“There is still room for prices to go up much higher, if for example the dry conditions in Argentina tend to become a drought, and if we start having problems with winter kill in the northern hemisphere for the wheat crops,” Abbassian added in the Guardian report.
The news comes on the heels of a UN report in November noting food prices are expected to increase drastically in the coming year.
The Australian flooding has the potential to impact commodity prices for an extended period as sugar cane growers have warned that production problems could linger there for as long as three years. Australia’s wheat crop has been impacted as well, with the country’s large export industry expected to take a hit.
Adding to the decrease in food production, a steady rise in oil prices since midterm elections in the US is likely to make the situation worse, although officials are quick to point out the current price of a barrel of oil, around $95, is not as high as the July 2008 rate of $145 a barrel.
According to The Independent, there has been a rise in food prices for six months in a row. Wheat prices have almost doubled since last June and sugar has reached a 30-year high. In the UK, fruit prices rose 7.5 percent in November while meat and poultry prices increased 1 percent. The increases are the highest since 1976.
Developing countries are expected to be hit hardest in the coming months, as the world’s poor are heavily dependent on food staples.
Adding to the severity of the situation is the possibility of inflation spikes, increased subsidies for biofuel which puts added pressure on corn production, and food futures markets.
The chief international economist at Capital Economics, Julian Jessop said: “The upward pressure on inflation this year from the recent surge in the cost of agricultural commodities will be much greater than that from the pick-up in oil prices,” according to the Guardian.
He added that current concerns over food prices are centered on speculation and environmental issues, rather than rising oil prices: “In contrast, the surge in agricultural food prices is largely a consequence of supply shocks, such as droughts in major wheat producing countries. These have been compounded by speculative pressures.”